According to TrendForce’s latest investigations, RF Front-End component and foundry revenues will be affected negatively due to the ongoing COVID-19 pandemic and the U.S.-China trade war which has resulted in the Chinese government’s policy of decoupling from the US. Lowered demand for telecommunication end-devices in 2020 is also expected to lead to a weak market for GaAs RF front ends as well. GaAs RF front end revenue is projected to reach US$ 5.793 billion this year which is a 3.8% decline year-over-year (YoY).
TrendForce analyst John Wang stated that RF front end modules components can be classified according to their applications in various telecommunication devices. These applications include PA (power amplifiers), LNA (low noise amplifiers), and filters. Of the above applications, the GaAs is particularly well suited for use in PA components because of its high temperature resistance, high usable frequency range, and low noise under high frequencies. Furthermore, the number of PA components used in smartphones has increased along with the jump in cellular frequencies. For instance, 4G smartphones contain on average 5 to 7 PA parts per unit, while 5G smartphones contain 10 to 14 parts.
Given the ever-intensifying U.S.-China trade war, in which the U.S. government increased tariffs on Chinese goods imported into the U.S., the Chinese government attempted to respond by instituting a policy of decoupling from the U.S. and by importing goods and services from other countries instead. Nonetheless, China still depends on U.S.-based IDMs for PA components and RF modules due to its insufficient R&D competencies for RF front end components. Although the trade war has lowered U.S. IDMs’ revenues earned from Chinese clients, the fact that Chinese smartphone manufacturers must import some products from these IDMs means U.S. IDMs were able to maintain their bottom lines to a certain extent. In 1Q20, Qorvo’s revenue grew by 15.7% YoY to reach $788 million, while Skyworks’ revenue decreased by 5.5% YoY to reach $766 million.
The overall GaAs foundry revenue was also disrupted by the U.S.-China trade war in 1H19. In 2H19, however, under the influence of China’s decoupling from U.S. goods and services, Chinese IC design companies decided to directly purchase from WIN Semiconductor Corp and AWSC. In 1Q20, WIN’s revenue grew by 67.8% YoY to reach $201 million, while AWSC’s revenue also increased by 162.6% to reach $27 million. On the other hand, GCS’ performance during the same period was relatively mediocre, registering a $12 million revenue, a 2.8% decrease YoY, in 1Q20, since operations at its primary fab, located in California, were affected by the pandemic.
Despite the continued impact from various reasons, RF revenue is expected to recover in 2021 due to 5G development. TrendForce expects revenues of major RF front end IDMs to potentially make a rebound from rock bottom in 2021, as the global build-out of 5G base stations accelerates, and 5G handsets account for an increasing share of smartphone manufacturers’ yearly production. At the same time, some foundries are also likely to benefit from these circumstances, with the overall GaAs foundry revenue making an expected rebound as well.
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